EUR/USD jumps on cautiously dovish Fed rate outlook

EUR/USD caught a volatile bullish swing on Wednesday after the Federal Reserve (Fed) delivered a third straight interest rate cut. The Fiber pair is testing its highest intraday bids in nearly a week as markets tilt toward more interest rate cuts to come further down the road, as well as signs that the Fed is gearing up to open the spigots on Quantitative Easing (QE) programs.

The Federal Open Market Committee (FOMC) voted nine-to-three to deliver another quarter-point interest rate cut, with one policymaker preferring a 50 basis-point trim and two voters opting for no cuts at all.

The range of FOMC policy outlooks has widened heading into the end of the year, but markets are latching onto a notable hawkish tilt in the Fed’s 2026 economic outlook in the latest update to the Summary of Economic Projections (SEP). The dot plot of FOMC interest rate expectations also widened, but investors are focused on a growing number of Fed policymakers who see room for two or more interest rate cuts next year.

More to come….

EUR/USD 5-minute chart

Economic Indicator

Fed Interest Rate Decision

The Federal Reserve (Fed) deliberates on monetary policy and makes a decision on interest rates at eight pre-scheduled meetings per year. It has two mandates: to keep inflation at 2%, and to maintain full employment. Its main tool for achieving this is by setting interest rates – both at which it lends to banks and banks lend to each other. If it decides to hike rates, the US Dollar (USD) tends to strengthen as it attracts more foreign capital inflows. If it cuts rates, it tends to weaken the USD as capital drains out to countries offering higher returns. If rates are left unchanged, attention turns to the tone of the Federal Open Market Committee (FOMC) statement, and whether it is hawkish (expectant of higher future interest rates), or dovish (expectant of lower future rates).